Abraaj nears deal to offload its 66pc stake in K-Electric to Chinese group

Private equity firm Abraaj is close to reaching agreement with the Pakistan government to sell its 66 per cent stake in Karachi-based electricity company, K-Electric to a Chinese group, reports Financial Times.

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Two years back, K-Electric’s sales price to Shanghai Electric Power was quoted at about $1.8 billion, which would have earned Abraaj about $450 million.

However, according to senior people at Abraaj, the deal, which was previously held up due to regulatory approvals is being renegotiated at a lower price.

For the creditors of the Dubai based Abraaj, the proposed sale is still likely to prove the biggest source of recovery funds and is will also provide some money to investors, the people added.

“There is more momentum than ever before,” one Abraaj executive said, as reported by Financial Times.

Abraaj, once the Middle East’s largest buyout fund with close to $14bn of assets under management, was sent into a death spiral last year after investors accused the indebted firm of misusing funds. However, Arif Naqvi, the companies Pakistani-born founder has denied any wrongdoing.

The company owes almost $1.1 billion in debts and the liquidators have since been negotiating to sell assets to recover them. In recent months, the companies founder, Arif Naqvi, who had allegedly been one of the biggest funders Pakistan’s Prime Minister Imran Khan’s unsuccessful 2013 election campaign, has been using his connections with the new Pakistan government headed by Khan to salvage the transaction.

At the end of December, Shanghai Electric informed the Pakistan Stock Exchange (PSX) that it intended to make a revised offer for a majority of K-Electric. The announcement was followed by a meeting between Shanghai Electric, Prime Minister Imran Khan and Arif Naqvi in Islamabad.

According to reports, tariffs that the utilities are allowed to charge were changed before the original sale was agreed, leading to a reduced valuation.

Recently, there has been an ever growing number of transactions between Chinese interests and Pakistani companies. Chinese infrastructure companies are building ports, power plants, roads and railways and other infrastructure as an initiative which is expected to see about $65 billion in spending over five years.